Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IL&FS Transportation Networks Ltd
Bumpy road ahead; downgrade
to Neutral
Cut EPS by 4/13%; revised PO of Rs220, Neutral
We downgrade ITNL from Buy to Neutral with a reduced PO of Rs220 (limited
upside potential of 16%) due to (a) estimate E&C margin at 10-12% (vs earlier 15%)
at parent level in FY13/14E on 3-9m execution delay; biz valued at parent (vs consol
level earlier) and (b) high-margin fee biz revenue to fall 70% YoY in FY13E on
project completion. In addition, we are concerned with intense competition for new
project wins which may potentially push ITNL to grow inorganically (like YuHe
acquisition) and bid aggressively compromising on IRRs (in KNR highway, ITNL’s
Rs1.35bn bid grant was 68% below L2 bid). Cut EPS by 4%/13% in FY13/14E.
Execution delays; value the parent level E&C
ITNL is witnessing 3-9 months delay in 29% (by lane-length) of projects under
execution owing to contractual delay and land acquisition/labor issues. Parent level
E&C margin is estimated at 10-12% on hard project costs. These expand to 21-24%
at consolidated level on a 10-13% mark-up over project cost and interest during
construction period for BOT asset (for annuity).
High-margin fee business contribution to decline
In our view, fee income business @ 3% of project cost is set to drop to Rs1.3bn
(down 70%yoy) in FY13E on completion of Jharkhand/RIDCOR project. Hence, its
contribution to revenue at 10% in FY12E will drop to 2% in FY13E. Likewise, the
EBITDA contribution will likely fall from 23% in FY12E to 5% in FY13E.
Not an U/PF on diversified portfolio, 1.5x jump by FY14E
(a) ITNL has a well-diversified portfolio of annuity + toll projects, spread over 14
states and has multiple sources to win projects. (b) Well poised for 1.5x growth
during FY13-14E. (c) Strong EPC o/bk at 2.1x FY12E sales offers good CF
visibility and drives 2/3rd of sales. (d) EPS growth is 14% over FY12-14E with RoE
of 19%/20% for FY12/13E, well above its peers. (e) YuHe road (operating)
acquisition is EBTIDA accretive by 6% in FY13E and contributes to 4% in SoTP.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IL&FS Transportation Networks Ltd
Bumpy road ahead; downgrade
to Neutral
Cut EPS by 4/13%; revised PO of Rs220, Neutral
We downgrade ITNL from Buy to Neutral with a reduced PO of Rs220 (limited
upside potential of 16%) due to (a) estimate E&C margin at 10-12% (vs earlier 15%)
at parent level in FY13/14E on 3-9m execution delay; biz valued at parent (vs consol
level earlier) and (b) high-margin fee biz revenue to fall 70% YoY in FY13E on
project completion. In addition, we are concerned with intense competition for new
project wins which may potentially push ITNL to grow inorganically (like YuHe
acquisition) and bid aggressively compromising on IRRs (in KNR highway, ITNL’s
Rs1.35bn bid grant was 68% below L2 bid). Cut EPS by 4%/13% in FY13/14E.
Execution delays; value the parent level E&C
ITNL is witnessing 3-9 months delay in 29% (by lane-length) of projects under
execution owing to contractual delay and land acquisition/labor issues. Parent level
E&C margin is estimated at 10-12% on hard project costs. These expand to 21-24%
at consolidated level on a 10-13% mark-up over project cost and interest during
construction period for BOT asset (for annuity).
High-margin fee business contribution to decline
In our view, fee income business @ 3% of project cost is set to drop to Rs1.3bn
(down 70%yoy) in FY13E on completion of Jharkhand/RIDCOR project. Hence, its
contribution to revenue at 10% in FY12E will drop to 2% in FY13E. Likewise, the
EBITDA contribution will likely fall from 23% in FY12E to 5% in FY13E.
Not an U/PF on diversified portfolio, 1.5x jump by FY14E
(a) ITNL has a well-diversified portfolio of annuity + toll projects, spread over 14
states and has multiple sources to win projects. (b) Well poised for 1.5x growth
during FY13-14E. (c) Strong EPC o/bk at 2.1x FY12E sales offers good CF
visibility and drives 2/3rd of sales. (d) EPS growth is 14% over FY12-14E with RoE
of 19%/20% for FY12/13E, well above its peers. (e) YuHe road (operating)
acquisition is EBTIDA accretive by 6% in FY13E and contributes to 4% in SoTP.
No comments:
Post a Comment